Global Witness | Financing a parallel government? | Zimbabwe | June 2012 FINANCING A PARALLEL GOVERNMENT? The involvement of the secret police and military in Zimbabwe’s diamond, cotton and property sectors 1 Global Witness | Financing a parallel government? | Zimbabwe | June 2012 signed just weeks after security forces Executive Summary killed over 150 protestors and raped over 100 women in a stadium. This report reveals how Zimbabwe’s feared secret police, the Central This briefing extends the Economist’s Intelligence Organisation (CIO), appears analysis of the Queensway syndicate’s to have received off-budget financing activities in Zimbabwe. Several reliable from Sam Pa, a businessman based in sources within the secret police have Hong Kong; and how members of the passed information to Global Witness CIO are directors of a group of demonstrating how Sam Pa appears to companies, Sino Zimbabwe have provided a significant sum of Development*, registered in Zimbabwe, money, said by one CIO document seen Singapore and the British Virgin Islands. by Global Witness to be $100 million, to the CIO. The same sources, Several well informed sources have told corroborated by another source with Global Witness Sam Pa (AKA Antonio firsthand knowledge of the deal, also Famtosonghiu Sampo Menezes, Xu describe how Sam Pa provided 200 Jinghua and Sam King) holds leadership Nissan pick-up trucks to the CIO. In positions in a network of companies return, Sam Pa received diamonds and known as the Queensway syndicate. The accessed business opportunities in the syndicate was the subject of a detailed cotton and property development study by the Economist in 2011. This sectors. As figure 1 shows we also use study concluded that syndicate has a company registry records and sources track record of opaque ‘resources for within the secret police to identify three infrastructure’ deals across sub-Saharan Zimbabwean directors (Gift Kalisto Africa. Despite the official sounding Machengete, Pritchard Zhou and names of its companies, such as China Masimba Ignatius Kamba) of Sino International Fund and Africa Zimbabwe Development in Zimbabwe, Development Corporation, the syndicate Singapore and the British Virgin Islands is largely owned by private Hong Kong who are members of the CIO, and which business interests. Until recently some we therefore believe to be companies of the key companies, such as China which are controlled in part by members Sonangol International Ltd, were also of the Zimbabwean secret police. Global partly controlled by a leading Angolan Witness invited Sam Pa and the directors politician, Manuel Vicente, the former of Sino Zimbabwe Development to head of Angola’s state oil company comment on our findings, and they have Sonangol. Finally, the Economist not done so. highlighted that two companies in the syndicate, China Sonangol International There are three reasons why these (S) Pte Ltd and CIF Singapore Pte Ltd, developments are of concern. are noted for an ethically dubious deal with the Guinean military junta in 2009, * In this document we refer to ‘Sino Zimbabwe Development’ as shorthand for three companies: Sino Zimbabwe Development (Pvt) Ltd, registered in Zimbabwe; Sino Zimbabwe Development (Pte) Ltd, registered in Singapore, and Strong Achieve Holdings Ltd, registered in the British Virgin Islands. In the Zimbabwean media and other public sources there are also occasional references to Sino Zimbabwe Holdings (Pvt) Ltd and Sino Zimbabwe Cotton Holdings (Pvt) Ltd, but there is no record of these companies at the Zimbabwean company register. We have been informed by reliable sources that these unregistered companies are in effect the same company as Sino Zimbabwe Development (Pvt) Ltd – assertions backed by the fact that Jimmy Zerenie, a known director of Sino Zimbabwe Development (Pvt) Ltd, represented Sino Zimbabwe Holdings (Pvt) Ltd in the media during a cotton dispute in 2010. Finally it should be noted that ‘Sino Zimbabwe Development’ is unrelated to other companies with similar names: Sino Zim Cement Company (SZCC), registered in Zimbabwe, and Sino-Zim Mining Corporation Ltd and Sino-Zim Mining Resource Company Ltd, both registered in Hong Kong. In this document any reference to ‘Sino Zimbabwe’ or ‘Sino Zimbabwe Development’ should be taken to mean companies with connections to the Queensway syndicate rather than SZCC, Sino-Zim Mining Corporation Ltd or Sino-Zim Mining Resource Company Ltd. 2 Global Witness | Financing a parallel government? | Zimbabwe | June 2012 First, by its very nature any off budget Democratic Change (MDC) including financing for the secret police Prime Minister Morgan Tsvangarai, undermines democratic processes and Finance Minister Tendai Biti, and Industry institutions in Zimbabwe. Off budget Minister Welshman Ncube. According to funding subverts civilian and democratic the single source within the CIO Sam Pa’s control of the CIO, and allows the secret money was allocated specifically to police to set, and fund, its own agenda. Operation Spiderweb. However, by their Second, Sam Pa’s likely financial support very nature, such claims about secret for the CIO may undermine Zimbabwean intelligence agencies are difficult to verify democracy more directly. According to and should be treated with caution. two sources, one senior Zimbabwean Third, members of the CIO have been government official and one source repeatedly identified as perpetrators of within the CIO, the secret police is violence in the recent past, and therefore engaged in ‘Operation Spiderweb’, covert Sam Pa’s apparent material assistance activities designed to discredit senior may fund future human rights abuses in figures from the opposition Movement for the run up to the forthcoming election. Figure 1: Ownership structure of Sino Zimbabwe Development group and Sino Zim Diamond Ltd (see annex 2 for details).* Lo Fong Hung Veronica Fung Yuen Owns Owns 30% 70% Beijing Tian Qiao Cultural New Bright Int'l Dev Ltd (HK) Wu Yang Development Company (HK) Directors: Veronica Fung Yuen Lo Fong Hung Owns Owns Owns 0.0001% 69.9999% 30% Dayuan Int'l Development (HK) Directors: Veronica Fung Yuen Lo Fong Hung Owns 1% Owns 99% China International Goal Achieve Alero Key Fund Ltd (HK) Holdings Ltd - companies controlled in part by CIO members Directors: Ltd (BVI) (BVI) Veronica Fung Yuen Lo Fong Hung Owns Owns 50% 50% Holds Gift Kalisto Jimmy Strong Achieve Star Delight MIL Company Ltd Machengete Zerenie Holdings (BVI) Holdings (BVI) (HK) Authorised Authorised Directors: signatory: signatory: Owns Owns Lo Fong Hung 51% 49% Masimba Ignatius Lo Fong Hung Moshe Hallak Kamba Sino Zim Development (Pvt) Owns Owns Owns Owns (Zimbabwe) 30% 70% 20% 80% Directors: Lo Fong Hung Sino Zim Development Pte Veronica Fung Yuen (Singapore) Jimmy Zerenie Transferred Directors: Sino Zim Diamond Ltd $50m to (Hong Kong) Gift Kalisto Machengete Masimba Ignatius Kamba Pritchard Zhou Lo Fong Hung Directors: Alain Fanaie (joined late 2011)* Eliezer Nefussy Jimmy Zerenie * Alain Fanaie only joined Sino Zimbabwe Development Pte, and other companies in the Queensway syndicate, in late 2011, after the events described in this report. 3 Global Witness | Financing a parallel government? | Zimbabwe | June 2012 Anjin is likely part-owned and part- The MDC Finance Minister has stated controlled by the Ministry of Defence that the Treasury has not received any revenues from Anjin. Global Witness has This report also revisits earlier Global received copies of receipts from Anjin for Witness research into a large diamond payments to other government bodies mining company, Anjin Investments (Pvt) but not the Zimbabwe Revenue Authority Ltd. Our last report established the and we conclude that the Finance partial control exercised by figures from Minister’s claim is plausible. This leaves the Zimbabwean military, police and two possibilities: that Anjin has used Ministry of Defence over the firm’s revenues earned so far to recoup executive board. This current briefing significant capital expenditure, or that reports the results of research into revenues have been diverted to the Anjin’s ownership. Zimbabwean company’s part owners in the military company records reveal that a senior and police. Anjin is a large diamond military lawyer in the Ministry of Defence mining company. It claims to be the holds 50 per cent of Anjin’s shares. world’s largest, and a well informed Together with factors such as the industry observer has told us that, in presence of the Permanent Secretary of terms of size, Anjin could be “the next De the Ministry of Defence on Anjin’s Beers”. If these claims are true, then executive board, these company records one explanation is that significant sums have led Global Witness to conclude that of money could flow to the Zimbabwean half of a large diamond mining company military. is likely part-owned and part-controlled by the Zimbabwean Ministry of Defence, military and police. Key Recommendations Global Witness believes that the activities of Sam Pa, Sino Zimbabwe Development (Pvt) Ltd and Anjin Investments (Pvt) Ltd should be investigated by relevant authorities to see if their actions undermine Zimbabwean democratic institutions or risk funding future human rights abuses and therefore meet the threshold for being placed on targeted sanctions lists. The MDC Finance Minister, when discussing Anjin, feared that “there might be a parallel government somewhere in respect of where these revenues are going.” This is a serious accusation, with profound consequences for Zimbabwe’s